The UK housing market remained subdued at the end of 2025, but sentiment is showing signs of improvement as expectations for sales and prices turn more positive following a period of reduced political uncertainty.
The latest RICS UK Residential Market Survey shows buyer demand and agreed sales remained in negative territory in December, reflecting a market that has been weak for much of the year. New buyer enquiries recorded a net balance of -24%, while agreed sales stood at -19%. Both indicators improved modestly on the previous month, suggesting the pace of decline is easing.
Forward-looking indicators showed a clearer shift in sentiment. Sales expectations for the next three months rose to +22%, the highest level since October 2024. Looking twelve months ahead, a net balance of +34% of respondents expect sales volumes to increase, more than double November’s reading. Surveyors cited easing interest rate expectations and the removal of Budget-related uncertainty as key factors supporting confidence.
Supply conditions stabilised, with new vendor instructions flattening to a net balance of 0% after several months of decline. While this indicates market conditions have stopped weakening, low appraisal activity suggests any increase in available stock is likely to be gradual.
House prices continued to fall at a national level, with a net balance of -14%, although the pace of decline moderated. Regional differences remain pronounced, with sharper falls reported in London (-42%) and the South East (-32%), while Scotland and Northern Ireland continued to record price growth. Short-term price expectations have moved close to neutral, and a net balance of +35% of respondents now expect prices to rise over the next year, the most positive outlook since late 2024.
Tom Bill, head of UK residential research at Knight Frank, commented: “The renewed confidence seen in recent weeks underlines the rule that the less a government intervenes in the housing market, the closer it operates to full capacity. The combination of clarity around taxation and the prospect of further rate cuts means demand in the first weeks of January has been stronger than normal. That doesn’t mean the market is now on an upwards trajectory and domestic political risks could still undermine sentiment over the next six months. For now, the absence of bad news means that some of the demand that became pent up last year is being released and we expect UK prices to grow by 3% this year.”
The lettings market remains under pressure. Tenant demand weakened further in December (-27%), while new landlord instructions stayed deeply negative (-39%), underlining persistent supply constraints. Rents are expected to keep rising, with average rental growth forecast at around 3% over the next twelve months.
Bill added: “Tenant demand has been relatively strong in the lettings market following the Budget and the clarity it brought. However, supply is still under pressure as more landlords sell up due to the proliferation of red tape and taxes in recent years. The big test in 2026 will be the Renters’ Rights Act, with some prospective landlords sitting on their hands to watch how it plays out and whether the court system becomes overwhelmed. As supply comes under pressure, it means upwards pressure on rents will persist, which is exactly the sort of unintended consequence that governments worry about when they design new legislation.”
While activity on the ground remains subdued, the December survey suggests the market may be turning a corner. With interest rates expected to fall further and confidence rebuilding, the foundations are being laid for a more active start to 2026.
RICS’ head of market research and analysis, Tarrant Parsons, commented: “The UK residential market remains in a prolonged soft patch, with December’s survey recording a sixth consecutive month of negative momentum in buyer enquiries. That said, there are tentative signs of a shift in sentiment beneath the surface.
“Near-term sales expectations have strengthened, and the twelve-month outlook has edged into more positive territory. The key test for 2026 will be whether borrowing costs ease on a sustained basis. If so, this could provide the catalyst needed to drive a recovery in buyer demand.”
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